Louis Spagnuolo of WCS Lending in Boca Raton is back with more answers to your housing questions. Today's topics include lawsuits in condo buildings and refinancing for self-employed borrowers. To ask a question that Louis may answer next week, click here.

Q: My fiancé and I are trying to purchase a short sale condominium, and we are being told that we will not qualify for a government-backed loan due to pending litigation within the building. Why should litigation have anything to do with me as a borrower? Shouldn’t I be able to be approved based on my credit and income? –Sheila

A: Sheila, right now condominiums are very challenging to finance in South Florida. Generally speaking, government-backed loans require that there is no litigation of any kind within a condominium. In the past, we have seen loans turned down for irrational reasons, which have had no effect on the unit or even the tower that clients were trying to buy into. My suggestion is to seek out a lender that is not looking to sell the loan back to the government.

Q: As a self-employed business owner, I am being told that I need to be able to show my past two years’ W-2 forms and both business and personal tax returns to refinance my mortgage. My business has been struggling lately, and I pay myself only a small salary. Will I be able to refinance my home? Tony

A: Financing for self-employed borrowers is very challenging in today’s current lending environment. Prior to the recent financial meltdown, self-employed borrowers were allowed to state their incomes without the requirement of tax returns and W-2 forms. Additionally, borrowers are having challenges if their business incomes show a pattern of decline or if their individual salaries have been reduced from previous years. I would suggest you work with your certified public accountant in conjunction with your bank to see if you can possibly back out some income so that your debt-to-income ratios meet the lender’s requirements.

Q: I have a $285,000 mortgage. My house has now dropped in value to around $125,000. Is there any way to try to get any assistance from a loan modification program? Or is there any way to get out of this house and into a different one? With costs rising, and our salaries staying the same, nearly anything would help. Elizabeth

A: Right now it is estimated that almost 50 percent of South Floridia homeowners are "upside down" on their home mortgages. If you are struggling with your payments, the first step is to reach out to your mortgage holder and see if the lender would be willing to work with you. If not, you should seek out professional legal advice to see what options you have available to you.

Q: I am in the process of trying to purchase a condominium in downtown Fort Lauderdale and have been told that I have been approved for a Federal Housing Administration loan, but because the building does not have “reserves” I am unable to close. How can this be? – Howard

A: Howard, I understand your frustration. Unless the condominium is FHA-approved, then reserves for the building will be required. Most likely you are attempting to do a “spot approval,” which makes it mandatory for the building to have reserves. By the way, spot approvals will no longer be allowed starting Nov. 1. I would suggest that you seek out a portfolio lender and see if the seller would be willing to provide you with a seller’s concession to make up for the additional down payment that will be required.

Comments

Great Post!BuyaMortgageNow mortgages by Leader One Financial Corporation offer great rates on second mortgages, home loans, refinancing, debt consolidation, first time home buyers, home equity lines and more for Overland Park.

Interesting article, I have been trying to finance a condo in litigation myself with little success. This article does a good job of explaining why its so difficult as well :
http://www.bankapedia.com/mortgage-encyclopedia/faqs/672-why-is-it-so-difficult-to-finance-a-condo-in-litigation

Great Post!BuyaMortgageNow mortgages by Leader One Financial Corporation offer great rates on second mortgages, home loans, refinancing, debt consolidation, first time home buyers, home equity lines and more for Overland Park.

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About the authors

PAUL OWERS is a West Palm Beach native who graduated from the University of Central Florida in 1989. He covers the housing market for the Sun Sentinel after spending seven years on the real estate beat for that daily paper just up the road. He has impeccable timing, arriving at the Sun Sentinel on the very day that Hurricane Wilma pummeled South Florida. The real wrath came in early 2006, from readers, when he wrote that the five-year housing boom was over. They argued, cursed and complained before grudgingly admitting he was right.Follow @paulowers